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The spirits of long past owners and celebrities are palpable in the dimly-lit tunnels beneath the Cal Neva Resort, Spa and Casino.

Turn a corner and the faint presence of Frank Sinatra surrounded by a posse and swaggering toward a packed crowd in his namesake showroom coalesces.

In another brick-lined narrow hallway the faint whispers of early owners and reputed racketeers Bill Graham and James McKay seem audible " in the midst of it the mist of a bootlegger sweeps by, bathtub gin and all.

Any sound " the creak of the floor boards, the building settling or footsteps coming from upstairs " reverberates from the past and transforms into a hurried waitress, irked mobster or enamored couple.

The boarded off staircases seem to disappear and instead of worn, dry wood secret doors come to life. Up through a trap door in the stage of the showroom, Sinatra's theater fills with applause from the past for a headliner.

Like its previous inhabitants the resort is a ghost of its notoriety. Instead of star-studded headlines, its publicity is made of foreclosure notices and fire safety violations.

In upcoming months the stateline-straddling resort could be sold to the highest bidder in a foreclosure sale, and the winner will own a defining piece of Lake Tahoe and Nevada history.

"If you're talking about a very colorful casino property that can match up with Vegas then it's the Cal Neva," said Guy Rocha, recently retired 28-year Nevada State Archivist. "It can match with a Vegas property not on size but what happened there."

The magic of Stateline

In 1926 wealthy San Francisco real estate developer Robert Sherman convinced his business partners Spencer Grant and Harry Comstock to buy up all the land they could on the Nevada side of the North Lake Tahoe Stateline while land was selling between $1 and $5 an acre.

By the end of that year the first Cal Neva cabin was built, a log-cabin structure designed to resemble a lodge in a Broadway play and 1925 silent film called "Lightnin'."

Will Rogers would later star in the 1935 sound film version of the production that was filmed partly at the Cal Neva cabin. The plot revolves around Rogers' character and his wife Mary who own and operate a hotel on the California-Nevada stateline which exploits that location to provide California divorcees with a quick Nevada process.

"America understood what the Cal Neva lodge was because of this concept," Rocha said. "It was a location in this country people understood was unique."

The property transferred from Sherman to Norman Henry Biltz, a young salesman Sherman sent to the lake in 1927 to sell the property to wealthy clients. Biltz eventually sold so much property that the cabin was given to him in exchange for the commissions owed.

Once gambling came to the Cal Neva in 1928 the property's stateline status became a benefit for gambling. If county sheriffs were to raid the lake from either the California or Nevada side, guests would simply move to whichever side of the room was safe.

By 1930 gamblers McKay and Graham bought the lodge from Biltz for $65,000 and gambling became legal on the Nevada side of the lake later that year. The Cal Neva was the first legal casino in the United States.

Fire came to the property in 1937 and destroyed the walls adorned with stuffed wild animals and an indoor stream that was filled with sizable rainbow trout meant for dinner.

McKay and Graham rebuilt the lodge within six weeks and spent more than $280,000 on the new structure, which included the still-standing Indian Room, Circle Bar and main casino area.

While the resort passed through different ownership from 1937 until the mid -1950s, it entered its glory days of fame when Frank Sinatra bought the property.

The Rat Pack Years

When Sinatra bought the "Lady of the Lake" he began to renovate it at a breakneck speed, adding the Celebrity Room and a helicopter pad on the roof.

He also had tunnels added and remodeled beneath the property so that he and some of his less reputable associates could move unseen beneath the resort, said Carl Buehler, who gives a ghost tour of the tunnels each Saturday at the Cal Neva.

Some of Sinatra's frequent guests included Sammy Davis Jr., Dean Martin, Marilyn Monroe, Judy Garland and members of the Kennedy family.

Monroe's famed cabin still stands at the Cal Neva, and is a part of Buehler's tour.

"A lot of people didn't know that Marilyn loved the outdoors, so she loved coming to Tahoe for its natural beauty," Beuhler said.

As for Monroe's supposed secret rendezvous with President John F. Kennedy, Rocha said those tales are made more of legend than truth.

According to a 1997 article Rocha wrote for the Sierra Sage, it was "virtually impossible that Marilyn Monroe was there at Lake Tahoe to greet the aspiring presidential candidate" on his one documented visit to Lake Tahoe and the Cal Neva in February 1960.

"The truth in its entirety will likely never be known about the JFK-Monroe affair," Rocha wrote. "However, the stories about a liaison between John Kennedy and Marilyn Monroe at Lake Tahoe are unsupported, and may well represent a titillating, modern-day presidential version of the 'George Washington slept here' myth."

Still those myths and legends along with the factual fascinating history of the property are part of its legend, Rocha said.

Sinatra's time at the Cal Neva came to an end in 1963 after the Nevada State Gaming Control Board began investigating his connection with Sam Giancana, a persona non grata in the gaming board's books.

When Giancana was discovered in use of Chalet No. 50 at the Cal Neva Lodge between July 17 and 28, 1963 with Sinatra's knowledge, Sinatra and board chairman Ed Olsen had a heated conversation in which Sinatra told in no uncertain terms to leave his business alone.

After a formal meeting between Sinatra and Olsen in Carson City in Oct. 7 of that year Sinatra released a statement that he would divest himself completely from his involvement.

Living on legend

After Sinatra's exit the property went through another series of ownership, with the high rise hotel being built on the property in 1969.

By 1985 the resort had been closed and vacated for three years when past owner Chuck Bluth bought it.

"The property was in bad shape," Bluth said. "It had been let go for who knows how many years. It was ugly, I had to rework the whole hotel. I was a developer so I looked at it as a challenge."

During his two-decade ownership Bluth said he began to focus in on the historic nature of the property.

"The history became a very important part of my marketing and it gave me an opportunity to get a lot of coverage without paying for it," Bluth said.

The tunnel tours began under Bluth's ownership as well.

After his attempt to renovate/remove some of the property's older structures was rebuffed by the Tahoe Regional Planning Agency, Bluth put the property up for sale and it was eventually bought by Namcal.

In December 2008 Namcal's lender Canpartners filed a notice of default against the property for $25 million. As of March 9, Canpartners could begin selling the property in a foreclosure sale according to Nevada law.

"Whoever comes in is going to have to have a broader view of what's needed instead of trying to fire it back up again especially in this economy," Bluth said.